Morning in Arizona

The Headline Animator

Friday, February 10, 2017

Stocks Finish Friday with Gains

Charles Schwab: On the Market

Posted: 2/10/2017 4:15 PM ET

Stocks Finish Friday with Gains

U.S. stocks continued to trade in record-high territory, staging
another solid advance as yesterday's comments from President Trump
regarding his soon-to-be-announced tax plan continued to fuel gains.
Crude oil extended its recent rally, the U.S. dollar increased,
Treasuries were lower and gold ticked slightly higher. In economic news,
consumer sentiment dropped from a 13-year high and short-term inflation
expectations rose.

The Dow Jones Industrial Average (DJIA) advanced 97 points (0.5%) to
20,269, the S&P 500 Index gained 8 points (0.4%) to 2,316, and the
Nasdaq Composite added 19 points (0.3%) to 5,734. In moderate volume,
789 million shares were traded on the NYSE and 1.9 billion shares
changed hands on the Nasdaq. WTI crude oil increased $0.86 to $53.86 per
barrel and wholesale gasoline rose $0.02 to $1.59 per gallon.
Elsewhere, the Bloomberg gold spot price ticked $3.14 higher to
$1,233.51 per ounce, and the Dollar Index—a comparison of the U.S.
dollar to six major world currencies—was 0.1% higher at 100.76. Markets
were higher for the week, as the DJIA increased 1.0%, the S&P 500
Index advanced 0.8% and the Nasdaq Composite gained 1.2%.

Activision Blizzard Inc.
(ATVI $47) announced 4Q earnings-per-share (EPS) ex-items of $0.92 per
share, well above the expected $0.73, with revenues growing 15.8%
year-over-year (y/y) to $2.5 billion, compared to the anticipated $2.4
billion. Separately, the gaming company announced a new share repurchase
program of up to $1.0 billion and a 15% increase of its dividend to
$0.30 per share. Shares surged.

NVIDIA Corp.
(NVDA $114) posted 4Q EPS of $0.99, above the $0.83 FactSet estimate,
as revenues jumped 55.0% y/y to $2.2 billion, versus the projected $2.1
billion. The chipmaker issued 1Q revenue guidance with a midpoint that
was slightly above forecasts. Shares gave up an early gain and traded
lower as the Street scrutinized its quarterly performance and guidance
after 3Q's blowout results that took the stock on a more than 70% rally.

Sears Holdings Corp.
(SHLD $7) jumped over 25% after unveiling its next phase of its
restructuring plan, projected to deliver at least $1.0 billion in
annualized cost savings in 2017 from the previously announced closure of
108 Kmart and 42 Sears stores, and reduce debt. The company also
announced preliminary 4Q guidance that was above forecasts.

The preliminary University of Michigan Consumer Sentiment Index (chart)
declined this month to 95.7, from the prior month's 98.5 level—which
was the highest since January 2004—and compared to expectations of a dip
to 98.0. The current economic conditions component held steady m/m,
while the outlook portion deteriorated. The 1-year inflation estimate
rose from 2.6% to 2.8%, and 5-10 year inflation outlook dipped to 2.5%
from 2.6%.

The Import Price Index (chart)
increased 0.4% month-over-month (m/m) for January, compared to the
Bloomberg projection of a 0.3% increase and December's upwardly revised
0.5% gain. Compared to last year, prices were higher by 3.7%, north of
forecasts calling for a 3.4% jump, and following December's upwardly
revised 2.0% increase.

The stock markets are back in record territory, while the U.S. dollar
and Treasury yields ticked higher, bolstered by U.S. President Donald
Trump saying yesterday that "something phenomenal" will likely be
announced regarding his tax plan in 2-3 weeks. This is overshadowing the
recent flare-up in concerns about global trade relations and
immigration on the heels of Trump's actions and comments. Also, last
week's relatively dovish takeaway of the Fed's unchanged monetary policy
decision and continued upbeat economic data have aided the markets.
Crude oil prices are extending a rally to lend further support, in the
wake of a report that suggested OPEC had achieved initial compliance of
90% with their recent production cut agreement. Schwab's Director of
Market and Sector Analysis, Brad Sorensen, CFA, discusses President
Trump and oil in his latest Schwab Sector Views: Trump Plus OPEC Equals ...What for Energy? at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

European equities finished mixed, with lingering political uncertainty
ahead of some key elections in the region being met with renewed
optimism regarding U.S. President Donald Trump's promise of a
"phenomenal" tax plan in the coming weeks. For analysis of these issues,
see Schwab's Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? and Director of International Research, Michelle Gibley's CFA, release, Europe Votes: Could More Countries Reject the EU? at www.schwab.com/oninternational.
Also, the markets digested a stronger-than-expected read on China's
trade activity and crude oil's continued rally on reports of OPEC's
compliance with its production cuts that boosted the energy sector. In
economic news, French industrial and manufacturing production reports
both missed estimates, while the U.K. trade deficit narrowed more than
expected and the nation's manufacturing and industrial production both
easily bested forecasts. The euro dipped and the British pound was
little changed versus the U.S. dollar, while bond yields in the region
finished mostly higher.

Stocks in Asia finished higher following the gains seen in the U.S. and
European markets yesterday, bolstered by the continued rebound in crude
oil prices and as U.S. President Donald Trump made a promise to expect
his tax plan soon. The renewed U.S. tax optimism overshadowed heightened
global trade and immigration concerns. Also, China reported a favorable
read on its trade activity, headlined by stronger-than-expected January
export growth. Japanese equities rallied with the yen giving back a
jump as of late amid a strong advance in the U.S. dollar, while traders
awaited today's meeting between Prime Minister Abe and U.S. President
Donald Trump. Mainland Chinese shares advanced and those traded in Hong
Kong also rose, while Australian securities gained ground and South
Korean stocks traded higher. Indian equities finished flat. For our
analysis of the global markets, see Schwab's Director of International
Research, Michelle Gibley's, CFA, articles, Currency Hedging: 5 Things You Need to Know and Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Stocks ride late-week rally back to record highs

Conviction remained contained to begin the week amid exacerbated global
market uneasiness toward the political risks in the U.S. and Europe,
with the former exacerbating trade and immigration concerns and the
latter facing key elections. However, the major U.S. equity markets
staged a late-week rally into positive territory and back to record
highs as reflation optimism resurfaced as President Trump pledged that a
"phenomenal" tax plan was in the offing. The U.S. Dollar Index posted
the first weekly gain of 2017 and Treasury yields pared early losses.
Crude oil prices battled back to near the flatline as reports of OPEC
production cut compliance countered oversupply concerns in the wake of a
couple bearish oil inventory reports. Gold extended its recent jump in
choppy trading.

The economic calendar was relatively light, though earnings season
continued to roll on and continued to paint a relatively positive
picture against elevated expectations. Hasbro Inc. (HAS $98) and Activision Blizzard were standout winners, while Michael Kors Holdings Ltd. (KORS $38) and Twitter Inc.
(TWTR $16) were hammered by their guidance. Per Bloomberg, with
earnings season past the apex, of the 357 companies in the S&P 500
Index that have reported, about 51% have topped sales estimates and
approximately 75% have exceeded earnings forecasts, with technology
issues leading the way adding credence to Schwab's Brad Sorensen's, CFA,
outperform rating on the sector in his latest Schwab Sector Views at www.schwab.com/marketinsight.

Next week, the domestic economic front will heat back up, with the Producer Price Index (PPI), Consumer Price Index (CPI), retail sales, industrial production, the Leading Index and housing starts and building permits, providing a good read on many key contributors to economic output. Also, the NFIB Small Business Optimism Index and regional manufacturing reports out
of New York and Philadelphia are poised to also garner attention, along
with festering political uncertainty on both sides of the Atlantic and
the continued dissemination of earnings reports. Finally, Federal
Reserve Chairwoman Janet Yellen will deliver her semi-annual testimony before Congress.

As noted in the latest Schwab Market Perspective: Not So Fast!,
investor caution is rising, which contrarily should help the bull
market continue. Economic data has continued to beat expectations, but
the number of upside surprises may start to level off, and investor
enthusiasm toward potential new policies from Washington could wane as
political realities set in. International growth appears stable, but
acceleration doesn't seem to be on the horizon, while trade tensions
pose a risk to global economies and markets. Read more at www.schwab.com/marketinsight.

Disclaimer: The material appearing on this site is based on data and information from sources we believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does it purport to be complete. Opinions and projections, both our own and those of others, reflect views as of dates indicated and are subject to change without notice. The contributions and opinions of others do not necessarily reflect the views of Marvin Clark, Monsoon Wealth Management, or Fixed Income Daily. Nothing appearing on this site should be considered a recommendation to buy or to sell any security or related financial instrument. Investors should discuss any investment with their personal investment counsel. Past performance does not guarantee future results.